Credit Scores around the Globe

Did you know that credit scores work differently across the globe? They also carry different levels of importance, are calculated differently, and are viewed from a different perspective depending on where you are in the world.

Personally, I found this fascinating. The experience of obtaining my first credit card and monitoring my credit score was unique to each country. By far, Canada has been the country that places the most value on a credit score.

Why is this important?

Forewarned is forearmed. Your existing credit score in your home country (if it has one), does not move with you when you move internationally. Knowing what to expect and being properly prepared can help set you up for long-term success. It will make the settling-in process smoother, faster, and easier. Do some research in advance. How does your new country view credit scores, credit worthiness and debt in general?

In some countries, such as the USA and Canada, having a good credit score is of the utmost importance. A good score will help in obtaining the cheapest financing for purchases including new homes and vehicles. A prospective job might also request your credit score as a means of determining that you are a fiscally responsible person. Good scores can also allow for better credit card options which include points and rewards that can be used for travel or other purchases.  

In other countries, credit scores may not exist or carry very little importance. It might surprise you to learn how unique each country can be in its views of credit.  

Some Countries that view credit scores differently:

• Netherlands: The Dutch are a rather debt-adverse culture. They do not use a three-digit “credit score” to determine creditworthiness. Cash or debit are much-preferred payment methods in day-to-day living.
  
   Although credit cards exist, they are much less popular and are considered much less reliable than cash or debit. Likewise, Credit card options will be less rewarding in terms of “points” and “rewards” (if any). Approval for a credit card may also be more difficult.
  
  When large loans are required, the prospective lender will consider factors such as the borrower’s income history, and experience in repaying past debts rather than a three-digit “score”.
  
  

• Japan:  Much like the Netherlands, Japan does not have a national credit score. Each bank will use its own metrics to determine how creditworthy they deem an applicant to be. Factors taken into account during a loan application process may include income, employment history, and existing loans (if any). In many day-to-day transactions, cash is still the preferred method of payment.  

The lesson:

Each country has its own view on credit and creditworthiness. It might be similar to that which you are used to……. or it may be completely different.  Make sure you set yourself up for success. Take a few minutes and do some country-specific research. You will be grateful you did.

How was your experience?

How was your experience setting in a new country and getting familiar with the credit system? Any interesting stories to tell?